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Tencent Music prepares for U.S. Flotation

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Tencent, China’s most valuable tech company and the operator of the popular WeChat social media platform, says it plans to spin off its streaming music service on a U.S. stock exchange.

According to a news report out of China last week, TME is expected to nail a public valuation of around $30bn after its IPO in the US.

Tencent is the current majority shareholder in TME and told its shareholders that the music company would now float on a “a recognized stock exchange in the United States through a registered public offering”.

“The terms of the proposed spin-off, including offering size, price range and assured entitlement of Tencent Music securities for shareholders of the company, have not yet been finalized,” Tencent said. Nor has the timing of the planned offering been decided.

Although Tencent and its current spin-off Tencent Literature are both listed in Hong Kong, the choice of a U.S. exchange for Tencent Music is understandable. It would allow financial analysts and investors to directly compare it with the world-leading music group Spotify Technology, which is also listed on NASDAQ and is currently valued at $29.9 billion. Following a share swap late last year, Spotify owns 9% of Tencent Music, and Tencent owns 7.5% of Spotify.

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The nation generated $292.3m for labels and artists, according to IFPI figures, up 35.3% on the prior year.

In May, Sony Music Entertainment COO, Kevin Kelleher, told investors:

“We think in five years China could be a Top 5 market. Tencent, which is a major player in that marketplace, has 700mn+ people using their music service every month, with 25mn paying subscribers. They’ve got great ambitions, as have some other companies.”

In its current form, Tencent Music was established in 2016 after a merger with streaming rival China Music. Since then it has cemented its leadership position by adding to and renewing deals with international studio groups Universal Music, Warner Music and Sony Music. It also has deals with China’s Huayi Brothers Music and Korea’s YG Entertainment.

In preparation for this float, Tencent has submitted a proposal to the Stock Exchange of Hong Kong, which has since confirmed that Tencent can proceed with the proposed spin-off.

Tencent Music owns digital music services QQ Music, Kuwo and KuGou in China and China entered the Top 10 biggest recorded music markets last year.

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Abhishek Singh

Author: Abhishek Singh

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